Shopping tourism exists because fashion and tourism are both reflections of people’s aspirations and lifestyles. The World Tourism Organization puts shopping as one of the top deciding factors for travellers when choosing a destination, pre pandemic; shopping is also one of the largest categories of tourists’ spending.
Tourism spending has been growing, despite the global economic slowdown in 2019. Prior to the travel restrictions, it remained world’s top ten spending markets.
Though the pandemic has halted tourism, retailers are optimistic with the reopening of borders even if it is a slow start to recovery. This is a good time to look at where we left off shopping tourism and how the future looks.
The UK’s luxury market has been on the rise over the past decade thanks to overseas shoppers. Visitors from the USA, the Gulf, China, Russia, and other countries have been spending millions in places like Harrods, Bicester Village, Bond Street etc.
Statista reveals, the UK received 1.5 million tourists from the Middle East in 2019, who spent roughly £869 million. Similarly, Chinese visitor spending reached over £1.71 billion; and Russian tourists spent £182.35 million in the same year.
Of course, with the restrictions placed on travel in 2020 led to a significant fall in tourist numbers and therefore tourist spending. For instance, Russian tourists spent a mere £6,210 million in 2020, a 78% drop on 2019 figures.
According Visit Britain, one of the top 3 reasons for Russian tourist in the UK is shopping; and 72% of them are repeat visitors who add to the growth of shopping tourism.
Shopping experiences are undeniably a lure big lure for tourists to visit the UK. However, the e-commerce success of British goods proves that the brands alone are tempting to shoppers. Statista calculates UK e-commerce worth to be £693 billion in 2019 with demand from far reaching countries such as the USA, the UAE, and China. In fact, over half of China’s online shopper purchase British brands.
The outbreak of the Covid-19 pandemic caused borders to close and the global passenger traffic to fall by 60% to 2003 levels in 2020. The Office for National Statistics found passenger arrival to the UK to drop from 6,804,900 in February 2020 to 112,300 in April 2020. The effect of this 98.3% drop in passenger arrivals is a drastic plummeting of spending which Visit Britain predicts to be 78% (from 24.2 billion pre-pandemic to £6.2 billion in 2020).
One of the main reasons for the lack of shopping tourism is undoubtedly the travel restrictions imposed by the UK government. However, for high street retail, shopping tourism could see a decline due to the financial difficulties consumers are facing as a result of the pandemic. It is estimated that the pandemic has pushed between 119 and 124 million people into extreme poverty last year and for the first time in 20 years, global poverty is increasing. Thus, with less money in their pockets, people will be certainly be spending less on travel and shopping.
From 17th May 2021, travel restrictions have been eased. Shopping tourism is expected to pick up as restrictions are removed in stages. Visit Britain expects 11.3 million visitors to travel into the UK, which is a 10% increase on 2020 but only 28% of 2019 levels. Furthermore, European travel is expected to recover at a faster rate than long haul destinations leading to lower average spend per visit.
Domestic tourism may be the saving grace for British retailers in tourist hotspots as Britons are predicted to spend £51.4 billion on domestic tourism in 2021, which will be 51% more than 2020 and 56% of 2019 levels.
Tax Free Shopping.
The UK government has thrown another spanner in the works by declaring the end of tax-free shopping in the UK as of New Year’s Day 2021 and Brexit. The Moodie Davitt report estimates this decision to cost the UK economy £2.1 billion and risk 19,400 jobs. Companies such as WHSmith, who made a loss of £226 million for the full year to end of August 2020, will find it difficult to recover, especially the airport stores.
Duffry’s CEO of UK and Northern Europe, Fed Creighton, has vowed to “continue to offer the same value” by providing “20 per cent saving versus the UK average high street price and we will still offer some of the more popular fragrances at 40 per cent saving versus the UK average high street price.” This might harm the net profit of the company but will help improve customer spending.
In summary, since tourism is recovering slowly, so will the spending of tourists. Retailers should focus on strategy to improve footfall and time spent in stores as well as provide a great experience in order to persuade consumers to spend more and ensure fast recovery.